WHY CONFISCATION HAS SUCCEEDED HITHERTO

NOW that I have impressed on you at such length as a canon of nationalization that Parliament must always buy the owners out and not simply tax them out, I am prepared to be informed that the canon is dead against the facts, because the direct attack on property by simple confiscation: that is, by the Government taking the money of the capitalists away from them by main force and putting it into the public treasury, has already, without provoking reaction or revolution, been carried by Conservative and Liberal Governments to lengths which would have seemed monstrous and incredible to nineteenth century statesmen like Gladstone, proving that you can introduce almost any measure of Socialism or Communism into England provided you call it by some other name. Propose Socialistic confiscation of the incomes of the rich, and the whole country will rise to repel such Russian wickedness. Call it income tax, supertax, and estate duties, and you can lift enough hundreds of millions from the pockets of our propertied class to turn the Soviet of Federated Russian Republics green with envy.

Take a case or two in figures. Gladstone thought it one of his triumphs as Chancellor of the Exchequer to reduce the income tax to twopence in the pound, and hoped to be able to abolish it altogether. Instead of which it went up to six shillings in 1920, and stopped at that only because it was supplemented by an additional income tax (Supertax or Surtax) on the larger incomes, and a partial abolition of inheritance which makes the nation heir to a considerable part of our property when we die possessed of any. Just imagine the fuss there would have been over this if it had been proposed by a Socialist Prime Minister as Confiscation, Expropriation, and Nationalization of Inheritance on the Communist principles of the prophet Marx! Yet we took it lying down.

You have perhaps not noticed how this taxation is arrived at in Parliament at present. The Chancellor of the Exchequer is the Minister who has to arrange the national housekeeping for the year, and screw out of a reluctant House of Commons its consent to tax us for the housekeeping money; for with the negligible exception of the interest on certain shares in the Suez Canal and in some ten companies who had to be helped to keep going during the war the nation has no income from property. Whom he will be allowed to tax depends on the sort of members who have been returned to Parliament. Without their approval his Budget, as he calls his proposals for taxation, cannot become law; and until it becomes law nobody can be compelled to pay the taxes. In Gladstone’s time Parliament consisted practically of landlords and capitalists and employers, the handful of working class members being hopelessly outvoted by the other three sections combined, or even single. Each of these sections naturally tried to throw as much of the burden of taxation as possible on the others; but all three were heartily agreed in throwing on the working class as much of it as they could without losing too many working class votes at the next election. Therefore the very last tax they wished to sanction was the income tax, which all of them had to pay directly, and which the wage workers escaped, as it does not apply to small incomes. Thus the income tax became a sort of residual tax or last resort: an evil to be faced only when every other device for raising money had been found insufficient. When Gladstone drove it down from sixpence to fourpence, and from fourpence to twopence, and expressed his intention of doing without it altogether, he was considered a very great Chancellor of the Exchequer indeed. To do this he had to raise money by putting taxes on food and drink and tobacco, on legal documents of different kinds, from common receipts and cheques and contracts to bills of exchange, share certificates, marriage settlements, leases and the like. Then there were the customs, or duties payable on goods sent into the country from abroad. The industrial employers, who were great importers of raw materials, and wanted food to be cheap because cheap food meant low wages, said “Let them come in free, and tax the landlords”. The country gentlemen said “Tax imports, especially corn, to encourage agriculture”. This created the great Free Trade controversy on which the Tories fought the Liberals for so many years. But both parties always agreed that income tax should not be imposed until every other means of raising the money had been exhausted, and that even then it should be kept down to the lowest possible figure.

When Socialism became Fabianized and began to influence Parliament through a new proletarian Labor Party, budgeting took a new turn. The Labor Party demanded that the capitalists should be the first to pay, and not the last, and that the taxation should be higher on unearned than on earned incomes. This involved a denial of the need for keeping Government expenditure and taxation down to the lowest possible figure. When taxation consists in taking money away from people who have not earned it and restoring it to its real earners by providing them with schools, better houses, improved cities, and public benefits of all sorts, then clearly the more the taxation the better for the nation. Where Gladstone cried “I have saved the income tax payers of the country another million. Hurrah!” a Labor Chancellor will cry “I have wrung another million from the supertaxed idlers, and spent it on the welfare of our people! Hooray!”

Thus for the last fifteen years we have had a running struggle in Parliament between the Capitalist and Labor parties: the former trying to keep down the income tax, the supertax, the estate duties, and public expenditure generally, and the latter trying to increase them. The annual debates on the Budget always turn finally on this point, though it is seldom frankly faced; and the capitalists have been losing bit by bit until now (in the nineteen-twenties) we have advanced from Gladstone’s income tax of 2d. in the pound to rates of from four to six shillings, with, on incomes exceeding £2000, surtaxes that range from eighteen pence to six shillings according to the amount of the income; whilst on the death of a property owner his heirs have to hand over to the Government a share of the estate ranging from one per cent of its fictitious capital value when it is a matter of a little over £100, to forty per cent when it exceeds a couple of millions.

That is to say, if your uncle leaves you five guineas a year you have to pay the Government seventy-three days income. If he leaves you a hundred thousand a year you pay eight years income, and starve for the eight years unless you can raise the money by mortgaging your future income, or have provided for it by insuring your life at a heavy premium for the nation’s benefit.

Now suppose this income of a hundred thousand a year belongs to an aristocratic family in which military service as an officer is a tradition which is practically obligatory. In a war it may easily happen, as it did sometimes during the late war, that the owner of such a property and his two brothers next in succession are killed within a few months. This would bring the income of £100,000 a year down to £12,000, the difference having been confiscated by the Government. If we were to read in The Morning Post that the Russian Soviet had taken £78,000 a year from a private family without paying a penny of compensation, most of us would thank heaven that we were not living in a country where such Communistic monstrosities are possible. Yet our British anti-Socialist Governments, both Liberal and Conservative, do it as a matter of routine, though their Chancellors of the Exchequer go on making speeches against Socialistic confiscation as if nobody outside Russia ever dreamt of such a thing!

That is just like us. All the time we are denouncing Communism as a crime, every street lamp and pavement and water tap and police constable is testifying that we could not exist for a week without it. Whilst we are shouting that Socialistic confiscation of the incomes of the rich is robbery and must end in red revolution, we are actually carrying it so much further than any other fully settled country that many of our capitalists have gone to live in the south of France for seven months in the year to avoid it, though they affirm their undying devotion to their native country by insisting that our national anthem shall be sung every Sunday on the Riviera as part of the English divine service, whilst the Chancellor of the Exchequer at home implores heaven to “frustrate their knavish tricks” until he can devise some legal means of defeating their evasions of his tax collectors.

But startling from the Victorian point of view as are the sums taken annually from the rich, they have not in the lump gone beyond what the property owners can pay in cash out of their incomes, nor what the Government is prepared to throw back into circulation again by spending it immediately. They have transferred purchasing power from the rich to the poor, producing minor commercial crises here and there, and often seriously impoverishing the old rich; but they have been accompanied by such a development of capitalism that there are more rich, and richer rich, than ever; so that the luxury trades have had to expand instead of contract, giving more employment instead of less. And they have proved that you may safely confiscate income derived from property provided you can immediately redistribute it. But you cannot tax it to extinction at a single mortal blow. You have always to consider most carefully how far and how fast you can go without crashing. The rule that the Government must not tax at all until it has an immediate use for the money it takes is fundamental: it holds in every case. The rule that if it uses it to nationalize an already established commercial industry or service it must have a new public department ready to take the business over, and must compensate the owners from whom it takes it, is also invariable. When the object is not nationalization, but simple redistribution of income within the capitalist system by transferring purchasing power from one set of people to another, usually from a richer set to a poorer set, thus changing the demand in the shops from dear luxuries to comparatively cheap necessities, then the process must go no faster than the capitalist shops can adapt themselves to this change. Else it may produce enough bankruptcies to make the Government very unpopular at the next election.

Let us study a sensational instance in which we have incurred a heavy additional burden of unearned income, so strongly resented by the mass of the people that our Governments, whether Labor or Conservative, may not long be able to resist the demand for its redistribution.